Minimum wage's maximum impact

With a minimum wage adjusted for inflation based on the Denver- Boulder-Greeley consumer price index, within a decade a teenager could be earning a minimum wage of $10 an hour. And a waitress could earn $7 an hour plus tips.

The increase in minimum wage has caught some business owners off guard and left them scrabbling to compensate for its effects. And with the continued debate about raising the federal minimum wage to $7.25 per hour over a two year span, it's forcing many to consider the implications.

"I didn't even check the elections because I thought for sure it would go down in flames. I was shocked," said Kim Bayles, owner of Kimball's Twin Peak theater and the Metropolitan Restaurant and Bar.

The issue causing the most uproar involves tipped employees. The base wage had been $2.12 per hour. Now it has risen to $3.83.

"A lot of ma and pa shops are going to go out of business. I think only the strong are going to survive," Bayles said. "The little guy and even the chains get hurt by this."

Bayles said the new minimum wage requirements have increased his payroll by $10,000 to $12,000. "A $1.70 an hour increase - and I have a lot of servers - is brutal," he said. "Servers - they make more money than I do."

Bayles said he had to cut back to two or three servers a night, when there should be three to five servers, just to absorb the added payroll costs.

"At the theater, I had to cut way back on staff," he said. "I raised my tickets and my concession prices, I had to."

Fred Foster, chairman of the Pikes Peak Hospitality Political Action Committee, hosted a forum to discuss the new minimum wage laws at The Broadmoor on Feb. 5.

"It was a good three hour meeting," he said, and included discussions about the minimum wage, immigration and possibility of unionization.

Members of the lodging, hotel and restaurant industries, along with a couple people from management companies, attended.

"Information and knowledge is critical to make sure they are doing the right things," Foster said. "Subsequently, if they are missing the key points that they need to run their business, they are going to find out it is going to cost a lot of money if they don't have all the details."

Five or six businesses in Denver have already closed because they just can't deal with the new minimum wage rates, he said.

"Ultimately, it is going to cost the employers lots of money," Foster said. "It is all educational and how to utilize the law the way it is."

The forum panel consisted of an attorney, a professor from the University of Colorado at Denver and a director from the Colorado Department of Labor.

Foster said the committee plans to have more seminars to keep people informed about any changes and to help them with compliance.

He said the problem is that it isn't just the hospitality industry that is affected - it's the ripple affect. Once one industry raises its prices everyone else will.

Steve Bartolin, CEO at The Broadmoor, said the cost of doing business has gone up - even though the resort doesn't have any minimum wage employees.

"This thing was very deceptive," he said. "The curveball was lumping in tipped employees as minimum wage employees, which they are not. The other clinker is that it will change every year based on the CPI in Denver and Boulder, which traditionally are much higher than the rest of state. If that had been put in 30 years ago, our minimum wage would be $19.50 an hour."

He said the real people who have benefited are those who are already making $20 an hour.

The Broadmoor had 273 tipped employees last year, but because of the minimum wage increase the resort won't be able to hire that many this year, Bartolin said.

"I think we got it figured out so we don't have to (lay anyone off) at this point in time," he said. "What we will do is probably hire 70 less (employees)."

He said The Broadmoor's cost of business has gone up $700,000.

To compensate, Bartolin said the resort has had to raise prices in other areas, so ultimately the consumer is paying the tab.

The Broadmoor has added a 2 percent banquet service charge and all its menu prices will be raised.

Bartolin said the resort is big enough to absorb the increased costs, but the strain will be on the ma and pa restaurants.

And restaurants aren't the only businesses that have been affected. Businesses such as tourist destinations, where many teenagers get their first job, also are dealing with the reality of the new law.

Because of the increase in wages, the prices at Santa's Workshop have increased about 7 percent.

Owner Tom Haggard said he wasn't paying workers $6.85 in hour, but they were making more than $5.15.

"When you have something like this, it takes all the small increases out," he said. "If you artificially insert something that raises wages and it is not market related then these are the consequences."

Businesses now have to look at major changes like charging more money, being open fewer hours and hiring fewer people, he said.